Wave of Patent Cases Hits the Bay Area

Courtland Reichman of Dallas-based McKool Smith said his firm decided to follow its caseload to Silicon Valley, which is seeing an influx of patent litigation.

By Julia Love|September 27, 2013 at 04:53 PM

X

Share with Email

sending now...

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

SAN FRANCISCO &mdash; The map of patent litigation is shifting, and the Northern District of California is gaining ground.

A confluence of legislative reform and new case law has made it easier for companies slapped with patent infringement lawsuits to get out of the sticky Eastern District of Texas. Many of them are taking their cases West.

More than a quarter of all patent cases that have been transferred so far in 2013 landed in the Northern District of California, and 36 percent were sent to federal courts statewide, according to The Recorder’s analysis of IP litigation data compiled by Lex Machina. Just this month, Google, Apple, Twitter and Facebook each yanked suits back to the Bay Area, seizing the chance to wage IP battles on their home turf.

The influx of cases means more work for area judges, less travel for the region’s busy IP litigators, and a docket that includes more of the troll-style litigation that had previously been centered in Texas.

It’s a trend that Dallas-based McKool Smith saw coming when it decided to open an office in Silicon Valley last year.

“Now that the cases are being moved to where the innovators and the defendants are, that’s going to make California over time perhaps the most important place for patent litigation,” said Courtland Reichman, who launched the office.

Judges have transferred just four cases out of the Northern District so far this year. Meanwhile, more than 50 suits rushed in, the majority from Texas’ Eastern District.

All told there have been some 205 interdistrict transfers so far in 2013, according to Lex Machina&mdash;more than twice as many in just nine months as there were five years ago in 2008.

The stage has been set for transfers for several years, patent litigators say. The 2011 America Invents Act instituted stricter rules on joinder to curb single lawsuits that ensnare multiple companies. Defendants have an easier time making a case for transfer when they are on their own, and the U.S. Court of Appeals for the Federal Circuit has lent a helping hand. This week’s order in In re Nintendo Co., 13-151, was the latest in a series of decisions clamping down on judges in the plaintiff-friendly Eastern District of Texas for refusing to transfer cases.

“The Federal Circuit is saying that you really do have to consider the convenience of the parties,” said Michael Ladra, a partner at Latham & Watkins in Menlo Park.

The AIA joinder rules also have led to an overall uptick in patent cases, which might contribute to the surge in transfers, lawyers cautioned.

Many of the cases transferred into the Bay Area involve nonpracticing entities, which often have a harder time arguing for their venue of choice given their lack of meaningful physical headquarters and personnel. That could lend a new flavor to the Northern District’s patent docket, which has historically featured more suits pitting competitors. And as each jurisdiction houses its own judicial personalities and procedures for handling the cases, the transfers have prompted lawyers on both side of the divide to adjust their playbooks.

COMFORTS OF HOME

Apple, Facebook, Foursquare Labs, Groupon, LivingSocial, Twitter and Millennial Media&mdash;all accused of patent infringement by Evolutionary Intelligence&mdash;shuffled from the Eastern District of Texas to the Northern District of California earlier this month. Represented by Simpson Thacher & Bartlett, Apple led the charge for a transfer, arguing that the Northern District would be more convenient for all involved, including Evolutionary Intelligence.

“This lawsuit is a California lawsuit: EI, a company based in California, sued Apple, also based and founded in California, for allegedly infringing a patent issued to a California inventor by making and selling products that are designed and developed in California,” Apple argued in a motion for relief filed in December.

There may have been more to it. Aside from the comforts of litigating at home, the Northern District is seen as a more favorable venue for companies fending off infringement claims.

Motions for summary judgment often come late in the game in Eastern Texas and Delaware, but that’s not the case in the Northern District, said Fabio Marino, a partner at McDermott Will & Emery. The odds that they will be granted are better, too, said Ladra.

That means defendants with strong, claim-construction based arguments can be optimistic about their chances of a quick resolution in the Northern District, patent litigators say. And as costs mount the longer litigation drags on, trolls may have less leverage to shake out settlements.

“If defendants can transfer the case to their home location, it’s often a better result and a cheaper result,” said Neil Smith, a longtime patent litigator who practiced at Ropers Majeski Kohn Bentley.

Technology companies may also feel their cases will play better in the Northern District, where their brands are strongest and the jury pool is more technologically savvy. Jurors who work at companies steeped with patents may be less awed by the U.S. Patent & Trademark Office’s stamp of approval, IP litigators on the defense side say.

But Reichman of McKool Smith, which is associated with plaintiffs litigation, thinks the jury pool may actually tilt the other way. Local lore about companies born in garages could lead jurors to side with a solo inventor, he said.

“They are on balance a jury pool that knows that you don’t have to be rich and powerful to invent something that’s really cool,” he said.

Some predict that the volume of cases transferred into the Bay Area will soon taper off. As they see more and more cases booted from Texas, some plaintiffs are concluding that it is more economical to file in the Northern District in the first place, Reichman said.

Jennifer Doan of Texas’ Haltom & Doan helped Yahoo move a suit from the Eastern District of Texas to the Northern District of California last year.

“What I see from our clients is not that they want to be out of any one place,” she said. “They just want to be where they feel the case should have been in the beginning.”

DEEP IN THE HEART OF TEXAS

Many Bay Area patent litigators are well acquainted with the East Texas towns of Tyler and Marshall that have long attracted patent filings.

Trying back-to-back cases in the Eastern District of Texas, Edward Reines, a partner at Weil, Gotshal & Manges, would often find himself living in the Lone Star State for weeks at a time. He was in good company.

“There are standard hotels” for Bay Area transplants, he said. “You see people in baggage claim, rental car places, hotel lobbies.”

Local hoteliers seemed to monitor the docket.

“The transfers have probably hurt to some extent the burgeoning hotel industry in Marshall,” said Smith, the former Ropers patent litigator.

Bay Area lawyers often aligned themselves with Texan counterparts, catering to Eastern District judges who sought to protect the local bar.

“I always had a local counsel with a Southern drawl who was an active participant,” Smith said.

The relatively short roster of judges in East Texas allows lawyers to get acquainted with each jurist and shape their cases accordingly, a much tougher task with the Northern District’s vast bench, Reichman noted. Nonetheless, Bay Area lawyers are cheering the transfers along with their clients, Smith said.

“We know the local courts. We know the local patent rules,” Smith said. “We know what the playing field is going to be.”

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters.
Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss.
Tailored just for you. In your inbox. Every day.